Still headed to Greece in a handbasket

Published: Friday, February 1, 2013 at 4:30 a.m.

Last Modified: Wednesday, January 30, 2013 at 6:00 p.m.

The book is called “Keynes Hayek: The Clash that Defined Modern Economics” by Nicholas Wapshott. It’s worth reading for folks interested in the backgrounds and careers of these two great economists.

Facts

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Their disagreement boils down to this quote from the book: “Keynes believed that it was a government’s duty to do what it could to make life easier, particularly for the unemployed. Hayek believed it was futile for governments to interfere with forces that were, in their own way, as immutable as natural forces.”

John Maynard Keynes argued long ago that, in times of crisis, government spending is good. And, to some extent, he was right. But I suspect that even Keynes would see the flaw in spending almost 70 percent more than the government takes in, with the imbalance increasing every year and continuing with no end in sight.

Combine that with the fact that the Federal Reserve is debasing our currency by printing money hand over fist — which Keynes emphatically called an invitation to revolution. Our modern terminology refers to this as quantitative easing. To assist you in remembering the definition of this new term, here it is used in a sentence. “I need some groceries, but since I’m short on cash, I’ll have to fire up my inkjet quantitative easer, and quantitative-ease a few 20s.”

I’ll repeat what I wrote last May — we’re going to Greece in a handbasket, and there is no country out there big enough to bail us out.

The basic thrust of Friedrich von Hayek’s argument is familiar to all. Power corrupts. Big-government spending results in big-government central planning, and that always leads to tyranny and poverty.

When government provides everything to its citizens, it destroys individual incentive. Then, with no incentive, the only way to get humans to produce is to threaten them, hence the unavoidable tyranny.

Humans operate like this due to basic human nature — human beings will not voluntarily contribute anonymously to the good of the community. No matter how much one may wish otherwise, one cannot make it so. One might also wish that humans could fly by flapping their arms or by donning a blue cape, but no amount of wishing will make it true. We’re stuck with real humans, not superhumans who can function under big-government central planning.

Although Mr. Wapshott doesn’t name a clear winner between Keynes and Hayek, I believe the actual winner is Milton Friedman. Friedman is also discussed in the book, and he comes closest to balancing the principles of economics with the frailties of human nature to generate overall prosperity and freedom.

The policies of President Barack Obama and other Democrats are inevitably taking our country into economic ruin. As of now, a few liberals are able to see it, but not nearly enough.

As an example of the enlightened few, professor Arnold Trebach (www.trebach.com) recently noted: “To put fine point on the matter, our president terrifies me, even though during most of my life I have been a liberal Democrat and voted for him in his first election. If viewed honestly, his first term has been an unmitigated disaster.”

In a follow-up, he wrote: “I should have mentioned how I voted in the last election. For the first time in a long life, I voted almost exclusively for Republicans, including Mitt Romney for president. He was clearly the best qualified and most honorable candidate for the top position. A major part of my despair for the country is the manner in which our president and the Democratic Party openly worked to destroy the reputation of that kind, decent, honest man. That action was truly despicable. What makes it even worse was that it worked.”

And, yes, one reason I used the above quotes is that it’s comforting to know that at least one lifelong liberal saw the same thing in the election that I pointed out in my past two columns.

<p>The book is called “Keynes Hayek: The Clash that Defined Modern Economics” by Nicholas Wapshott. It's worth reading for folks interested in the backgrounds and careers of these two great economists.</p><p>Their disagreement boils down to this quote from the book: “Keynes believed that it was a government's duty to do what it could to make life easier, particularly for the unemployed. Hayek believed it was futile for governments to interfere with forces that were, in their own way, as immutable as natural forces.”</p><p>John Maynard Keynes argued long ago that, in times of crisis, government spending is good. And, to some extent, he was right. But I suspect that even Keynes would see the flaw in spending almost 70 percent more than the government takes in, with the imbalance increasing every year and continuing with no end in sight.</p><p>Combine that with the fact that the Federal Reserve is debasing our currency by printing money hand over fist — which Keynes emphatically called an invitation to revolution. Our modern terminology refers to this as quantitative easing. To assist you in remembering the definition of this new term, here it is used in a sentence. “I need some groceries, but since I'm short on cash, I'll have to fire up my inkjet quantitative easer, and quantitative-ease a few 20s.”</p><p>I'll repeat what I wrote last May — we're going to Greece in a handbasket, and there is no country out there big enough to bail us out.</p><p>The basic thrust of Friedrich von Hayek's argument is familiar to all. Power corrupts. Big-government spending results in big-government central planning, and that always leads to tyranny and poverty.</p><p>When government provides everything to its citizens, it destroys individual incentive. Then, with no incentive, the only way to get humans to produce is to threaten them, hence the unavoidable tyranny.</p><p>Humans operate like this due to basic human nature — human beings will not voluntarily contribute anonymously to the good of the community. No matter how much one may wish otherwise, one cannot make it so. One might also wish that humans could fly by flapping their arms or by donning a blue cape, but no amount of wishing will make it true. We're stuck with real humans, not superhumans who can function under big-government central planning.</p><p>Although Mr. Wapshott doesn't name a clear winner between Keynes and Hayek, I believe the actual winner is Milton Friedman. Friedman is also discussed in the book, and he comes closest to balancing the principles of economics with the frailties of human nature to generate overall prosperity and freedom.</p><p>The policies of President Barack Obama and other Democrats are inevitably taking our country into economic ruin. As of now, a few liberals are able to see it, but not nearly enough.</p><p>As an example of the enlightened few, professor Arnold Trebach (www.trebach.com) recently noted: “To put fine point on the matter, our president terrifies me, even though during most of my life I have been a liberal Democrat and voted for him in his first election. If viewed honestly, his first term has been an unmitigated disaster.”</p><p>In a follow-up, he wrote: “I should have mentioned how I voted in the last election. For the first time in a long life, I voted almost exclusively for Republicans, including Mitt Romney for president. He was clearly the best qualified and most honorable candidate for the top position. A major part of my despair for the country is the manner in which our president and the Democratic Party openly worked to destroy the reputation of that kind, decent, honest man. That action was truly despicable. What makes it even worse was that it worked.”</p><p>And, yes, one reason I used the above quotes is that it's comforting to know that at least one lifelong liberal saw the same thing in the election that I pointed out in my past two columns.</p>